Real vs. Nominal Interest Rate
The relationship between inflation and interest rates is shown by:
Real Interest Rate + Inflation = Nominal Interest Rate
The nominal rate is what’s commonly advertised, but the real rate accounts for inflation, showing the true cost of borrowing or return on investment.
Want to compare interest rates? Use an Interest Rate Calculator to analyze your loan or savings optionsWhat is an Interest Rate?
An interest rate is the percentage charged by lenders to borrowers for using money. It represents the cost of borrowing and is usually expressed annually. For example, an 8% annual interest rate on a $100 loan means the borrower pays $108 at year-end. Borrowers prefer low interest rates to minimize costs, while lenders seek high rates for better returns.
Interest rates apply to various financial transactions, including mortgages, credit cards, business loans, savings accounts, and investment return
Interest Rate: 0%
Total Payments: $0
Total Interest Paid: $0